THE SITUATION PREVAILS BECAUSE
MANY DEPARTMENTS SUFFER FROM LACK OF CAPACITY TO UNDERTAKE MEGA SIZE
PROJECTS

SHABBIR H. KAZMI
(feedback@pgeconomist.com)Oct 29 - Nov 4, 2012

The successive governments in Pakistan
have been making hefty allocations for public sector development programs (PSDP)
but spending only a fraction of the budgeted amounts. This can be attributed to
two factors: 1) PSDP being the first to axe when the governments faces crunch
and 2) lack of capacity to undertake mega projects. Added to these are
inefficiencies, massive corruption and lack of monitoring. However, the real
problem is likes and dislikes of donors and multilateral financial institutions
play a key role in the execution of projects.

Pakistan continues to suffer from huge
budget deficit and hefty allocations for PSDP are made only to achieve political
mileage or lure the multilateral donors but actual spending remains paltry. Most
of the developmental projects are conceived and designed with the help of
donors, based on their priorities and not because the country needs these.
Ironically multilateral agencies take away a significant portion of the grants
and loans as consultants' fees and also insist on buying plant and machinery
from the countries of their choice, irrespective of the fact these are too
costly.

The other problem is that local
executors spend substantial amounts on maintenance of elegant offices, paying
handsome salary to staff, purchase of expensive vehicles but actual spending
makes only a small percentage of the total spending. Since no consideration is
given to mobilize cash for the payment of interest and principal, additional
loans and grants are solicited to pay these liabilities.

Historically, in case of crunch the axe
falls on PSDP. The whiz kids strongly believe that spending millions on elected
representatives is more important than construction of educational institutions,
healthcare facilities, water supply and effluent disposal infrastructure and
even child and mother care centers. Millions of children and mothers die every
year due to inadequate health facilities. The situation is worst in rural areas
because private hospitals are available in urban areas, at least where people
can get the cure and care.

Public sector suffers from lack of
perception as well as lack of capacity to undertake mega projects. Even if it
gets the funds from outside it emerges incapable of undertaking such projects
effectively and efficiently. Pakistan has been borrowing huge amounts for the
maintenance of water reservoirs and irrigation systems. However, most neglected
projects include Sukkur and Kotri barrages. Another example of badly conceived
and executed projects is LBDO and RBDO. One of the worst examples is discharge
of saline water into Manchar lake.

WAPDA is still responsible for
construction of water reservoirs and hydel plants. Its power wing has been split
in NTDC, Discos and Gencos. This restructuring was aimed at privatization of
Discos and Gencos but the objective has not been achieved in almost twenty
years. This is because of lack political commitment as well as the pressure of
groups having vested interest. Be it WAPDA or any other state owned enterprise,
these have become the 'employment houses' for the political activists. One does
not have any objection on employing political affiliates as long as they remain
productive workers. However, the political activists given jobs in state owned
enterprises become a 'big pain'. Not only that they don't work but also indulge
in corruption.

Pakistan inherited one of the largest
man-made irrigation systems at the time of independence, which has depleted with
the passage of time due to inadequate repair and maintenance. Not only that huge
quantity of water is wasted annually, it also leads to water logging and
salinity. Every year thousands of acres of land are rendered uncultivable. On
top of that ill-conceived projects add to the woes of farmers. Country faces
precarious situation because if the rainfall in low drought like situation is
created and in case there are torrential rains worst deluges are caused.

Nearly 8,000MW electricity is produced
by the IPPs, which enjoy 'cost passed on' advantage. Public sector entities are
still responsible for generation, transmission and distribution of electricity.
Distribution companies buy electricity at expensive rates, suffer from two
contentious issues: 1) rampant theft and 2) mounting receivables. If they
dispatch 100 units receive payment for 30 units and remaining goes towards theft
and uncollectable. The failure to rectify the situation has resulted in circular
debt amount to billions of rupees. The problem is that cosmetics steps are taken
but no effort is made to remove the root cause.

Until recently gas distribution
companies were managed more prudently. Pilferage of gas is more difficult as
compared to electrify but granting indiscriminate connections, particularly for
CNG stations has caused serious problems. Not only demand exceeds supply but
theft of gas is also on the rise, especially by the CNG stations owned by the
politicians. Gas pilferage/leakage SNGPL now exceeds 300mmcfd, which is enough
to keep fertilizer plants getting gas from its network

Sui twins are listed at local stock
exchanges but majority stake is still held by the GoP. Gas distribution
companies also victim of circular debt issue. On one hand they are unable to
undertake revamping and expansion of their networks but more importantly face
huge leakage from highly depleted transmission and distribution networks. The
added problem is that profitability of gas marketing companies is dependent on
their operating assets. Since these are not able to create new assets their
profit is also going down, bad for the government and also bad for shareholders.

There is a need to specifically mention
the precarious water supply position of Karachi, which is at the mercy of tanker
mafia. All types of consumers spend billions of rupees annually on buying water,
due to little or no water flowing in the pipelines. This grave situation can be
attributed to pilferage of water from the main lines by the tanker mafia. Almost
all the localities, irrespective of low income or posh suffer from this
contentious problem. The KW&SB owes billions of rupees to KESC because it can't
recover the payments. The consumers have a valid point that of KW&SB can't
supply water; it should not expect payment of highly inflated bills.